Opinion on the Compliance with the Fiscal Discipline Rules of Municipal Budgets during 2024–2025

• In 2024, budgets of all municipalities were in line with their requirements.
• According to the planned municipal budgets for 2025, there is a risk that 2 municipalities will not comply with their fiscal discipline rules.
• If the assessment were based on unrevised data, the 2025 budgets of 5 municipalities would be considered as non-compliant with fiscal discipline rules.

The National Audit Office, implementing the function of the fiscal institution (NAO FI), carried out an assessment of compliance with the fiscal discipline rules of municipal budgets. Its objective was to determine whether the rules were complied with in the implementation of municipal budgets in 2024 and the approval of municipal budgets in 2025. The assessment also provides insight into the calculation of municipal budget balances, which municipalities can plan without violating the limits set by law.
  
The NAO FI found that in 2024 all municipalities' budgets were implemented in accordance with their requirements. All municipalities also respected the debt and guarantee limits. On the other hand, the preliminary assessment is that the initial 2025 budgets adopted by the councils of two municipalities (Anykščiai and Rokiškis) do not comply with their requirements.
  
"Our aim in the 2025 ex-ante assessment is to help municipalities identify risks of non-compliance with the rules so that they can adjust their budgets before the end of the year and ensure compliance with the rules. We hope that municipalities whose planned budgets do not meet the requirements will pay attention to this assessment", notes Auditor General Irena Segalovičienė.
  
The NAO FI also points out that if the 2025 assessment were based on unrevised data, the number of non-compliers would increase to 5. During the assessment, potential errors were identified in the documents submitted by the municipalities, and they were asked to review the data and, where necessary, revise the information. On this basis, the risk of non-compliance with the fiscal discipline rules was not confirmed for 3 out of 5 municipalities.
  
As of 2023, legislative changes have increased the borrowing capacity of municipalities. Flexibility has been introduced, allowing municipalities to borrow additional money to co-finance European Union and other international financial assistance and to add to revenue the accumulated unused part of the revenue.
  
"The problem of inaccurately reported or unreported unused revenue is a recurring one. Errors in municipalities' financial statements can affect the conclusion on compliance with fiscal discipline rules, so it is important for municipalities to pay attention to the accuracy of the information provided. If the rules are not followed, the flexibility rule that allows for higher borrowing may no longer be applied," says Jurga Rukšėnaitė, Head of the Budget Monitoring Department.
  
The municipalities' compliance with fiscal discipline rules in 2025 will be assessed in June 2026.